CHL, the parent company of Conduit Re, a pure-play Bermuda-based reinsurance business, reported an 83.1% combined ratio for the six months ended 30 June 2023, a 22.7-point improvement from a year-ago period, as it expanded gross premiums written by 52.9% into the current insurance hard market.
Gross premiums written for H1 2023 hit $542.2 million, showcasing a 52.9% increase from H1 2022.
The overall portfolio risk-adjusted rate change for H1 2023, net of claims inflation, is 15%.
Total reinsurance and other operating expense ratio of 15.0% for the first six months of 2023 compared with 14.9% for the same period in 2022.
Total net investment return of $22.6 million for the six months ended 30 June 2023 which includes a net unrealised gain of $5.7 million, compared to a net investment loss of $50.0 million which included $54.3 million of net unrealised loss in the same period in 2022.
Conduit Re posted a comprehensive income of $78.6 million, representing a 9.1% return on equity for the half year.
In an active natural catastrophe period for the industry, no major event loss, individually or in aggregate, had an outsized or material impact on our results for the period, the company said.
On 25 July 2023, Conduit’s Board of Directors declared an interim dividend of $0.18 (approximately 14 pence) per common share, resulting in an aggregate payment of $29.7 million. The dividend will be paid in pounds sterling on 8 September 2023 to shareholders of record on 18 August 2023.
During the first six months of 2023, Conduit Re continued to show growth across all segments, benefiting from new business, high retention and underlying growth of renewal business, coupled with improving rates. Client count and submission flow have increased in line with Conduit Re’s strategy, with the embedded renewing portfolio providing the key profitable foundations.
“This has been a very successful half year for Conduit, and we are delivering on the goals we set out when we founded the business in 2020. In a half year which has seen high industry losses, our focused underwriting strategy has delivered strong underwriting results which, coupled with our low expense base, have delivered a very attractive combined ratio of 72.5% (83.1% on undiscounted basis). With no back years prior to 2021, we continue to look forward to deploying capital effectively, taking maximum advantage of current market conditions, which we see continuing for some time,” Trevor Carvey, CEO, commented.
The discounted net loss ratio for the six months ended 30 June 2023 was 57.5% compared with 85.0% for the same period in 2022, while our undiscounted net loss ratio was 68.1% and 90.9% respectively. The prior period loss ratio was impacted by our estimated ultimate net impact, on an undiscounted basis, from the Ukraine conflict of $24.6 million.
“We are delighted to announce our maiden interim profit. The low combined ratio and highly attractive return on equity are testament to the effectiveness of our strategy. This is one of the hardest insurance markets in a generation and we are very well placed to capitalise on that with our efficient business model,” Neil Eckert, Executive Chairman, commented.
Total reinsurance and other operating expenses were $36.4 million for the six months ended 30 June 2023 compared with $22.1 million for the prior year. The increase is due to the continued growth of the business and increased headcount.
Conduit Re continues to maintain its conservative approach to managing invested assets with a strong emphasis on preserving capital and liquidity. Its strategy remains to maintain a short duration, highly-rated portfolio, with due consideration of the duration of our liabilities. The company’s investment portfolio does not hold any derivatives, equities, alternatives or emerging market debt.
The portfolio returned 2.1% during H1 2023 driven primarily by investment income given a generally higher yielding portfolio. Narrowing credit spreads also supported the portfolio during a period of yield volatility.
Net investment income, excluding realised and unrealised gains and losses, was $17.2 million for the six months ended 30 June 2023. Total investment return, including net investment income, net realised gains and losses, and net change in unrealised gains and losses, was a gain of $22.6 million.
While it expects market volatility to remain elevated in the near term, Conduit expects to be able to reinvest at higher rates as the existing portfolio rolls over.
